How to ensure your NDA is airtight: We’d tell you but it’s confidential

Many businesses utilize non-disclosure agreements (NDAs) to ensure that their trade secrets are exactly that … a secret. If your business operates with the use of a trade secret, be it your grandma’s secret recipe, a process, or a contact list, you may want to consider the use of an NDA.

An NDA establishes a confidential relationship between a business that holds a trade secret and a person who has access to that confidential information. NDAs protect business’ secrets by limiting how and when they are discussed and referred to. A typical non-disclosure agreement includes the following:

• A clear definition of the information that is to be kept confidential
• A description of any information that is excluded from confidentiality, for example, if it is required for legal or financial reasons
• The requirements of the signing party (they may be required to dispose of or destroy the information they receive)
• The time length of the agreement

There are multiple different types of non-disclosure agreements. A unilateral agreement requires one party - usually an employee - to agree to not reveal any confidential information that they learn while on the job. This is the most common type of NDA. Usually, these types of agreements are used to protect trade secrets such as recipes or processes, but they also may be put in place to protect copyrights created in an employee’s research, such as a scientist’s findings while working for a certain company.

The second type of non-disclosure agreement is a mutual non-disclosure agreement. These are typically established between two businesses that share information. For example, when a cell phone company is working to release a new updated model, they have to consult with the manufacturer of the microchips that go into the phone. But both businesses are responsible for maintaining each other’s confidentiality.

When drafting a non-disclosure agreement you want to ensure that you’re doing it right to fully protect yourself and your business. Obtaining the support of an attorney helps ensure that mistakes don’t arise. Some common mistakes that may occur when establishing an NDA include the following:

• Unclear definitions: An NDA must clearly define what information is to be kept confidential. If definitions are unclear in your NDA, it may be difficult to enforce later on.
• An incorrect party listed: If there are differences between the company name listed in the agreement and the company’s legal name, there may be difficulties enforcing the agreement.
• Unreasonable duration of the agreement: Specifying the term through which the NDA is effective may help uphold its validity in court if a dispute were to arise.  t.
• Improper authorization: An NDA may also be invalidated if it is signed by an unauthorized person. Some companies may also require multiple signers to approve it.

Having an airtight non-disclosure agreement is vital for many businesses. If your company holds a critical trade secret or shares valuable information with employees,  it should have a well prepared NDA. While your NDA may not stop your middle-school best friend from spilling your embarrassing childhood stories, it can stop your employees from leaking information to your competitors!

Hiring an attorney can help ensure that your NDA is properly prepared to protect you and your business in the event of a breach of confidentiality. If you’re looking for support in drafting a nondisclosure agreement for your business, the experts at @VirtualCounsel are ready to help!